Wanted: New CEO for Banyan

After disappointing investors last month with a $783,000 loss for the third quarter, Banyan Systems(BNYN) is shaking up its executive suite and laying off 15 percent of its work force to shore up its faltering network operating system business.

The networking services company has begun searching for a new chief executive, as founder and CEO David Mahoney himself admitted in a conference call this morning that he was not the right person to lead Banyan back to profitability.

Mahoney will step into a new role as vice chairman. Jeffrey Glidden, chief financial officer, was named acting president and chief operating officer, with all senior management reporting to him.

Banyan also named John Burton its new chief technology officer and chairman. Burton will lead the search for a new CEO.

Beyond the management shakeup, the company announced that approximately 100 positions, about 15 percent of the work force, will be eliminated either through layoffs or attrition. Eugene Lee, the new marketing vice president, did not reveal which divisions would be affected.

Banyan will also reduce product shipments to the inventory channel by $7 million to $10 million, a move that will cut its inventory but also result in lower revenues and a fourth-quarter loss.

"There is no tone or crisis-mode feel to this," Lee said. "We've been working on this plan for some time."

At least one analyst was skeptical. "An effective CEO several years ago might have turned the corner for this company," said Steve Dube, analyst at Wasserstein Perella Securities in New York.

Dube deemed chances for a Banyan turnaround a long shot. "They have a good product, but they've lost a lot of credibility in the marketplace. If they don't get this thing cooking by the first or second quarter of next year, they don't have but a nominal chance."

Banyan centers its business around Vines, a Unix-based operating system, and various enterprise networking services like file management and directory services. The company recently announced Microsoft Windows NT compatibility for Vines.

Banyan stock was down 1/4 of a point to 3-3/4 in mid-afternoon trading.